Investors interested in stocks from the Mining - Gold sector have probably already heard of Gold Fields (GFI) and Franco-Nevada (FNV). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Gold Fields and Franco-Nevada are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that GFI is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
GFI currently has a forward P/E ratio of 15.25, while FNV has a forward P/E of 44.74. We also note that GFI has a PEG ratio of 0.42. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. FNV currently has a PEG ratio of 2.86.
Another notable valuation metric for GFI is its P/B ratio of 5.98. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, FNV has a P/B of 6.49.
These are just a few of the metrics contributing to GFI's Value grade of B and FNV's Value grade of F.
GFI is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that GFI is likely the superior value option right now.
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Gold Fields Limited (GFI): Free Stock Analysis Report Franco-Nevada Corporation (FNV): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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